In a surprising twist, what seemed like a major victory for Nvidia is turning into a complicated mess. Just last month, the U.S. government announced it was softening its stance on chip export controls, allowing Nvidia to resume sales of its H20 chip to China. You’d think Beijing would be celebrating, but instead, they’re rolling out a red carpet of suspicion and mistrust.
According to Bloomberg, China has been telling companies, especially those involved in government and national security, to avoid using Nvidia’s H20 chips, as well as those from Advanced Micro Devices (AMD). Nvidia, for its part, quickly responded, stating that the H20 is absolutely not for military use and that banning its sale in China would only hurt U.S. economic and tech leadership.
China’s “Mandate” and Security Concerns
It gets even more complex. A separate report from The Information revealed that Chinese regulators have reportedly ordered major tech giants like ByteDance, Alibaba, and Tencent to completely stop buying Nvidia chips until a national security review is complete. Qingyuan Lin, an analyst at Bernstein, said it’s a “hard mandate” and that authorities are actually stopping new orders for some companies.
This news comes just weeks after Chinese officials even summoned Nvidia to discuss their concerns about potential “backdoors” or tracking technology within the chips. This move by Beijing is seen by many as a clear signal that the country is doubling down on its long-term goal of chip self-sufficiency. Chris Miller, the author of “Chip War,” suggests that China is telling its tech firms to stick with domestic suppliers like Huawei, even if Nvidia’s chips are better.
A Complicated Road Ahead
The ultimate goal for China is to build its own domestic supply chain, and experts say these efforts have only ramped up since the U.S. first imposed export restrictions in late 2022. While China’s own chip companies are still behind Nvidia in terms of scale and advancement, they are getting massive state funding and benefiting from the restrictions placed on Nvidia’s most powerful chips. Reva Goujon of Rhodium Group points out that Beijing is trying to ensure that Chinese-made chips are the go-to choice for local developers, especially now that U.S. officials are openly talking about a strategy to keep China dependent on American technology.
Despite this show of resistance, many experts believe Beijing won’t completely ban the H20 chips, at least not for the long term. Analyst Qingyuan Lin thinks it’s unlikely a permanent ban will be put in place after the investigation is finished, though he admits the length of the investigation is a mystery. In the meantime, the delay could give local players like Huawei even more time to fill the gap.
Ultimately, while the H20 chips have meaningful demand in China, Beijing’s moves send a clear message: the government will be watching their use closely, and the long-term goal remains a fully self-reliant chip industry.